HP: Gloomy Outlook Despite Increased PC Sales

HP Inc. is still experiencing headwinds during its first year as an independent firm.

The PC and printer corporation stated recently that its revenue for the most recent quarter edged lower by about  4 percent on a year-over-year basis to hit $11.9 billion, marking the third consecutive drop in quarterly sales since HP split during the month of November from Hewlett Packard Enterprise.

During the latter part of 2014, Hewlett-Packard Company performed a massive endeavor of splitting into two separate entities. One will focus on personal computers and printers, while the other one will specialize in corporate IT and data centers. The reason behind this split is that the two separate firms will manage to react more effectively in their own areas in the middle of the rapidly changing technology industry. Ultimately, the move is believed to help the companies compete better with their major competitors in the market. However, the latest financial results of HP reflect that it is difficult to fix a corporation that experiences declining sales.

Regardless of this, there were still some positives in the quarterly earnings report. One of these is that the company stated that its desktop computer and laptop segment sales clocked in a $7.5 billion, steady relative to the prior year. The fact that the PC division of HP did not plunge is noteworthy since the overall PC market is constantly declining.

According to the CEO of HP Inc Dion Weisler, one reason that the personal computer segment of the company managed to avoid a drop was the robust demand for high-end computers by gamers.

Weisler further stated, “We outperformed the market.”

Yet, the PC sales data were not sufficient for the company to say that business will be good in the present quarter. HP estimated that the non-GAAP earnings for the fourth quarter will come in at 34 cents per share to 37 cents per share. This figure is below the analysts’ forecast of 41 cents

Cathie Lesjak, the chief financial officer of HP, pointed out that one of the major reasons that the tech company is projecting downbeat earnings for the fourth quarter regardless of the stabilizing PC sales was that it has been pumping in a lot of money to boost its higher-end printers’ sales. The objective is to sell more of these in locations where individuals print more, which could result in more sales for printer supplies and other related services.

The HP CFO said, “We think that is the right investment to make.“ Even though the boost in investments will put some pressure on the present quarter, Lesjak promised that it will “pay dividends in supply revenue in the future.”

Furthermore, although the PC sales of HP stayed flat in the latest quarter, the company’s CEO was hesitant to say that this trend will continue and warned that he agrees with the forecast of major analysts that there will be downbeat PC sales for the second half of the current year, in comparison to the first half of 2016.

On Wednesday, HP shares tumbled by 6 percent to hit $13.54 during the after-hours trading. As of 5:31 AM GMT -4 on August 25, the stock is trading at $14.40, down by 1.17 percent or 0.17 points.

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